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Bonus Depreciation for S Corporations

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​If an S corporation chose the special depreciation allowance for qualified property on its federal Form 1120S, this bonus depreciation must flow through to the shareholders.

For Minnesota tax purposes, the business entity reports the bonus depreciation to shareholders on Schedule KS.

Shareholders must add back 80% of the bonus depreciation amount to their Minnesota taxable income for the year the bonus depreciation was claimed. They can then recover the remaining depreciation by subtracting one-fifth of the addback amount in each of the next five years. (See Minnesota Statutes 290.0131,subdivision 9 and M.S. 290.0132, subdivision 9.)

Reporting Bonus Depreciation to Shareholders

On the federal bonus depreciation line of Schedule KS, report each shareholder’s share of the S corporation’s entire federal bonus depreciation. Do not multiply this amount by 80%. (Each shareholder will calculate their own addback amount when completing their Minnesota income tax return.)

For example, if an S corporation has $1,000 in federal bonus depreciation and one shareholder, report $1,000 on their Schedule KS. If there are two 50% shareholders, report $500 on each Schedule KS.

For detailed shareholder information, see Federal Bonus Depreciation Addition and Federal Bonus Depreciation Subtraction.

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